ringledman
Registered User
- Messages
- 620
A 90% mortgage would be around £900 a month interest only. Add in min £100/month for service charge and you would be looking at around £300-£400 a month loss on your 'investment'. That is if you can even let it.
You would have to be crazy to get in on it. And as for capital gains forget it. Who in Manchester can afford £175k for a one bed?? Not many...
Today's telegraph-
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/02/21/cmbtl21.xml
Price of new build flats 'set to crash'
Last Updated: 1:10am GMT 23/02/2008
The price of new build flats are heading for a "full scale crash", causing misery for tens of thousands of buy-to-let landlords who gambled on an ongoing property boom, writes Paul Farrow
Taxman targets buy-to-let landlords
No let-up for buy-to-let
www.telegraph.co.uk/mortgages According to Dresdner Kleinwort Wasserstein "reckless lending and over-building of flats threatens recession because a bubble had been stoked "by highly speculative (and potentially highly suspect) development, lending and valuation practices which have led to over-supply of flats in cities across the country, most notably Leeds".
[broken link removed]Henry Laver Court in Colchester: the price of flats here fell significantly from 2006-07Flats rose from 21 per cent of all housing starts to 49 per cent in Q3 2007. Tellingly, said Dresdner, it fell off in Q4, supporting suggestions from, among others Barratt, that a number of higher density city centre sites could be 'mothballed'.
"We believe there will be a serious fall in sales and starts in the months ahead in new build apartments," said Alistair Stewart at Dresdner: "The urban flats market appears most in line for a full scale crash – a view we have held consistently since late 1995, when we observed the rise of 'investor clubs' and what struck us as sharp practice through much of the wider property market."
Stewart said that his concerns had been justified with the Financial Services Authority recently revealing that it is investigating over 200 cases of new build property fraud and that the City of London Police are set to produce a report on mortgage fraud within weeks.
A senior executive of the Nationwide building society also recently warned about "endemic fraud" where there has been oversupply of new city centre flats.
Stewart added: "Over-pricing, the impact of the credit crunch on lenders and fears of fraud are a 'triple whammy', which is already leading to evidence of a considerable tightening up in lending. The result, we are convinced, has to be a either a decline in prices or volumes ... or both. While we believe that the main problem lies with new flats – especially high density developments with only modest demand such as Leeds, Leicester, Nottingham and Ipswich – the impact will be felt more widely due to extensive buyer chains."
Last year, the Telegraph highlighted how investors who gambled on rising house prices were getting their fingers burnt. We revealed how half-a-dozen flats barely two years old at Henry Laver Court, part of a development in the heart of Colchester, sold, with incentives, for between £224,995 and £249,995 in 2006. But their reserve price at the auction was £140,000; five sold for £145,000, the other for £155,000 in July 2007.
The trend has continued and many flats that go under the hammer at auction today are "by order of the mortgagee'' - in other words, they were repossessed properties.
Many are new-build flats that had been sold to buyers with incentives such as stamp duty and legal fees paid or rental guarantees, suggesting that they were bought by budding buy-to-let landlords.
Investors who failed to put down a big deposit will have mortgage repayments in excess of £1,300 a month, while the rental value is only around £700 a month and plunging valuations are leaving them in negative equity territory. It gets worse: there are dozens of properties vying for every tenant. Investors who have been unable to cut their losses and run have been forced to hand in the keys to their lender.
In the North, several landlords who bought flats in a development in Liverpool are already counting the cost of buying off-plan through a property association. One association offered flats for sale at a discount because it was able to negotiate cheap deals by taking a number of properties in a new development at an early stage, and so get a "wholesale'' price. The rationale is that the property will have risen in value and the member can turn his off-plan investment into a handsome profit.
One Telegraph reader paid £139,000 for his off-plan two-bedroom flat in Liverpool two years ago. The association reckoned the property would be worth at least £153,000 when it was completed last year. But when the reader remortgaged he discovered that the property was worth just £121,000 and he has had to reduce his mortgage by £20,000 to qualify under the lender's buy-to-let criteria. Fortunately he had the means to reduce the mortgage and he has tenants in the flat - the rent now covers the new lower mortgage. But other landlords in the block may not have been so fortunate.
In Manchester, a repossessed flat bought for £178,000 in 2004, was recently offered at a London auction with a guide price of just £80,000. At a similar Manchester development, City South, one new flat was bought from the developer in 2001 for a just under £140,000 - it was sold a few months ago for just £87,970.
Experts advise that if you have a property that has been empty for a long time, ask yourself why: is the rent too high, perhaps, or have you bought in the wrong area?
"If it is the former, check what the market rent is and reduce it. If it is the latter, it might be time to cut your losses and sell the property,'' says Melanie Bien of Savills Private Finance.
"It is also worth checking whether your mortgage payments are as low as they could be. If you haven't remortgaged for some time and there are no penalties for switching, you may well find something cheaper.
Jonathan Cornell of Hamptons International suggests that investors struggling to find tenants should reduce the rent and top it up themselves - if they can. "Selling is the most painful option. If you can afford £100 month yourself, it might help you get a tenant. It will also buy you time - in 18 months it will be a more relaxed environment to sell in.''
